- The BoE implemented its first rate cut last week.
- Core inflation in the UK remains high.
- Recession fears in the US eased after upbeat employment data.
GBP/USD price analysis shows a bullish shift in sentiment as the pound recovers amid improving risk appetite. Notably, fears of a looming recession in the US eased as data showed the labor market remained solid.
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The pound had a tough week as markets were taken aback by the Bank of England’s recent policy change. At the same time, there was a decline as investors rejected risky assets due to fears that the US economy was heading for recession.
Last week, the Bank of England cut rates for the first time, indicating growing confidence that inflation is on the decline. However, it was a narrow 5-4 vote, indicating that some policymakers thought rates should remain high. Core inflation in the UK has remained stubbornly high, making policy makers cautious. However, as US inflation eases and the Fed moves closer to its first tapering, other central banks are taking a more dovish stance.
Elsewhere, US data showed jobless claims fell to an 11-month low of 233,000 last week. Meanwhile, economists had expected claims of 240,000. Jobless claims are a key indicator of the unemployment rate. The previous monthly jobs report raised fears of a recession due to a jump in the unemployment rate. However, this may just be a one-time thing. Policymakers will wait to see the incoming data before drawing conclusions about the state of the sector.
GBP/USD key events today
Neither the UK nor the US will release high-impact data today. Therefore, the couple could end the week peacefully.
GBP/USD technical price analysis: 30-SMA breakout signals a reversal
On the technical side, the GBP/USD price made a strong bullish move, breaking through the 30-SMA. At the same time, the RSI pushed above the 50 mark, indicating a change in sentiment. The previous downtrend weakened when the price reached the key support level of 1.2700. Here the RSI made a bullish divergence, indicating exhaustion.
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Moreover, even though the price made lower lows and highs, the bulls continued to make strong candles, indicating a corrective move. At the same time, the price remained close to the SMA, avoiding major changes. A reversal will allow GBP/USD to revisit resistance levels, including 1.2800 and 1.2900.
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